The Algorand Foundation revealed a $35 million USDC hole in its balance sheet due to its exposure to struggling cryptocurrency lending firm Hodlnaut, which has suspended withdrawals since Aug. 8.
Algorand is an institutional-grade blockchain infrastructure with built-in smart contract functionality. The Algorand Foundation is a non-profit community organization focused on developing the Algorand ecosystem.
The announcement was made on the Algorand Foundation’s website on September 9, with the Foundation stating that it was “pursuing all legal remedies to maximize asset recovery.”
Hodlnaut’s financial situation first fell into deep waters when its $300 million investment in TerraUSD (UST) on the peg protocol fell dramatically following the de-peg of UST and the collapse of the LUNA token, which led the crypto credit company to suspend withdrawals and halt all exchanges. activity, citing a liquidity crisis.
A few weeks later, the company was placed under interim receivership, a form of creditor protection program, by the Singapore court.
Today we informed the community about our USDC exposure to Hodlnaut after suspending withdrawals from their platform on August 8, 2022.
Full details can be found here: https://t.co/4pLkSiKW7b
— Algorand Foundation (@AlgoFoundation) September 9, 2022
The Algorand Foundation said the majority of investments blocked on the platform consisted of “short-term blocked deposits”, but are now inaccessible due to Holdnaut suspending withdrawals.
However, the Algorand Foundation notes that the $35 million represents less than 3% of the Foundation’s assets and that it “does not anticipate [any arising] operational or liquidity issues,” and added that “funds were surplus to day-to-day needs”:
“We invest some of our excess cash capital to generate returns for the development of the Algorand ecosystem, and these funds have been invested for that purpose.”
Struggling crypto lender Hodlnaut is now in interim court management to address its liquidity issues.
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Under Singaporean jurisdiction, corporate bodies are placed under interim judicial management for debt restructuring purposes to preserve and protect risky assets before legal proceedings commence.
The Algorand Foundation played a key role, noting that on August 29, the High Court of Singapore appointed nominees from the Angela Ee Foundation along with Aaron Loh of EY Corporate Advisors to act as interim judicial directors for Hodlnaut, aiming to preserve Hodlnaut’s assets until further legal action begins.